A drop in mortgage rates to 5% would bring a large number of buyers back into the market

The falling mortgage interest rate has not yet been able to break through the barrier in the stagnant housing market, but the good interest rate that could get the market moving again is approximately 5%.

This is evident from a new study by Emphasis Digital risk, which found that 42% of potential buyers said a 5% tariff would put them back in the market. Another 27% said they are targeting a 4% rate, while 20% say it is 6%.

“Many potential buyers began to question the American dream of homeownership when inflation pushed mortgage rates to a cyclical high of 8% in October 2023,” Mphasis co-founder and chief executive Jeff Taylor said in a statement.

“But now rates are down more than 1.5% from this peak. We’re getting closer to the homebuyer comfort zone of low 6%, high 5% interest rates, and the expected Fed cuts in September should help buyer sentiment. This is why industry estimates call for a robust 2025 with $2 trillion in mortgage production expected.”

According to the survey, home buyers are optimistic about the direction of mortgage rates; 64% say they are “very encouraged” or “somewhat encouraged” that interest rates are falling.

But 40% of respondents said they will wait until after the November election to buy a home, which could indicate the market may not immediately react to a September rate cut. Real estate agents often cite the election as a factor in the housing market, but a recent report John Burns Research and advice concluded that a seasonal decline in home sales is actually more severe in years when there are no elections.

Whether the election plays a role or not, home buyers haven’t rushed into the market, despite the fact that the interest rate on a 30-year loan fell to 6.55%, down from a peak of 7.87% in October 2023.

HousingWire Lead analyst Logan Mohtashami said high mortgage rates have created an inventory buffer. The availability of homes for sale has increased in markets across the country. This is especially true for new homes, as builders have shifted to a business model heavily focused on spec construction.